Job Growth Slows to a Trickle

Unemployment Rate Falls One-Tenth of a Percentage Point to 7.6%

The unemployment rate ticked down to 7.6% in March while only 88,000 non-farm payrolls were added to the economy. Sudeep Reddy and Phil Izzo analyze the numbers. Photo: Getty Images.

By

Brenda Cronin

Updated April 5, 2013 7:11 p.m. ET

Employers added fewer jobs in March than in any month in almost a year, a dark cloud after several months of slowly improving conditions in labor markets.

Just 88,000 jobs were created last month, far below February's 268,000 gain. The unemployment rate, derived from a separate survey, dropped to a four-year low of 7.6%. But the decline was prompted by nearly a half-million workers leaving the job market, not job growth.

There's no way to sugarcoat it: This was a lousy March employment report. Ben Casselman discusses takeaways from the jobs data. Photo: AP.

Friday's report from the Labor Department pushed investors out of stocks and into safer alternatives. The Dow Jones Industrial Average fell 172 points minutes after the report was released, but erased most of its losses to finish down 40.86 points, or 0.28%, to 14565.25. Demand for the perceived safety of U.S. Treasury bonds was strong, however, pushing the yield on the benchmark 10-year note down to 1.698%, its lowest this year.

The report is likely to mute talk—which had grown louder recently—that the Federal Reserve might move to curtail the pace of its bond buying, which is aimed at lowering long-term interest rates in an effort to spur spending, investment and hiring.

Fed officials have said they would buy long-term Treasury and mortgage bonds until the job-market outlook has improved substantially. One Fed official this week raised the possibility of a job market strong enough by summer for the central bank to begin pulling back from the program. But the March picture could raise doubts inside the Fed about how quickly the job market is healing and deflate that possibility.

The March reading stirred some fears of yet another "springtime swoon" for the labor market. In recent years, hiring has started the year strong, only to wilt as the weather warmed.

Friday's report underscored this point, as the government revised up its estimates for January and February by a combined 61,000 jobs. Even with those revisions, however, job growth started 2013 weaker than in the same period a year ago, suggesting the pace of hiring was trending down before March.

The jobs numbers reflect "a very sharp slowdown," said
Paul Ashworth,
chief U.S. economist at Capital Economics in Toronto. But, he added, the weak growth may be a more accurate reflection of the fragile recovery than the "surprisingly good" employment numbers notched in January and February.

The Nonfarm Payrolls Report

Friday's jobs report shows that talk of an early end to the Federal Reserve's bond-buying programs might have been premature. The Journal's Jon Hilsenrath has more on what the jobs report means for the Fed.

Labor-market indicators tend to lag behind the broader economy. The big job gains of early 2013 were notable, coming on the heels of the meager 0.4% annualized growth in gross domestic product for the final quarter of 2012.

Some economists considered that year-end weakness at odds with the strong jobs numbers registered early in 2013. March's report may represent something of a payback for the gains of the past two months.

January and February's job-market progress came despite headwinds for consumers and businesses, such as higher payroll taxes.

"It seemed very strange that for the first couple of months of the year we had seen no impact" from those forces on the jobs market, Mr. Ashworth said. In the past week, softness began to creep into some indicators, with manufacturing and services activity both slowing their pace of growth.

A Historical View

Analysts cautioned against reading too much into numbers that reflect only one month's performance and will be revised. They also cited possible factors behind March's stumble, such as budget turmoil in Washington and unseasonably cold weather in parts of the country.

The snapshot was the first jobs report after the $85 billion in sweeping federal budget cuts, known as the sequester, that were triggered early last month. Economists said the sequester's effect is likely to ripple through the recovery in the second and third quarters. The specter of that fallout may have damped some hiring in March.

"Job creation clearly sputtered in March," said
Eric Lascelles,
chief economist for RBC Global Asset Management in Toronto. "I chalk some of it up to trepidation over the sequester."

ENLARGE

Silver linings in the details were scant, beyond higher estimates for January and February's tallies. Employers took on 20,000 temporary workers in March, often seen as a hiring bellwether. The construction sector added 18,000 jobs, reflecting the housing market's healing, but well below the nearly 50,000 added the month before. Governments shed 7,000 jobs in March.

The decline in the unemployment rate resulted not from more people getting jobs but rather from almost 500,000 individuals leaving the workforce, because of layoffs as well as retirement and other reasons. The labor-force participation rate, which measures those employed as well as those looking for work as a portion of the population, fell 0.2 percentage points to a seasonally adjusted 63.3%, a level last seen in mid-1979.

Among the sectors that lost jobs was transportation, with truck transportation shedding almost 7,000 positions in March. Tennant Truck Lines Inc. of Colona, Ill., saw business "flatten out in the fourth quarter of 2012…after about 15 months of month-over-month growth," said
Aaron Tennant,
chief executive of the family-owned company.

ENLARGE

The company, which hauls agricultural and construction equipment as well as construction materials, still is hiring, Mr. Tennant said, despite the pause in business. That's because "long-distance truck drivers are incredibly hard to come by." Recruiting is our biggest challenge, and then retaining them once we have them." He plans to add between 30 and 35 jobs this year to his workforce of 225.

His company, which has been in business since 1946, is feeling both the benefits and costs of the housing recovery.

The rise in housing starts since the market bottomed last year "means more demand for construction equipment and steel and lumber and other materials that we haul," Mr. Tennant said. But it also means losing some of his drivers to the construction industry.

"Truck drivers hauling my freight can be gone from their families for a week," Mr. Tennant said. "They can walk out of my industry and into construction and walk into a job where they're home every night."

The housing market's gains have yet to reach some commercial contractors.
Richard Duncan,
who founded a project-management firm 11 years ago, said business in the first quarter has been "kind of a surprising flat line for us."

His 15-person company,
Rich Duncan
Construction, handles about 50 projects a year such as renovating offices, building restaurants or doing seismic upgrades on airport towers.

The Salem, Ore., firm usually is juggling almost a dozen projects, Mr. Duncan said, but that pace has slowed to fewer than 10 because clients' "hesitancy" about the economy has put expansion on the back burner.

The slower pace means more of Mr. Duncan's employees are doing hands-on work at job sites, instead of acting as general contractors and managing electricians, plumbers and other subcontractors.

"When we're hiring, we're hiring someone who is already trained and can step into a fast-paced situation. There's a real lack of qualified applicants at that level," Mr. Duncan said. "If we did let somebody go, the chances of us pulling somebody back in at the level we need them at, it's too risky."

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